Resales: The Reality

Expectation versus reality often throws up some serious mismatches, and that’s especially true when it comes to selling a franchise. It’s typically the first business a franchisee has sold, so what can a seller expect when it comes to marketing their business to attract a buyer, negotiating the sale, and ultimately exiting their business? 

I’ve spoken to a growing number of franchisees who are looking at selling their business over the past few months. A common theme is that on roughly 3 out of 4 of those calls, the franchisee expects the sale to complete in roughly 6 months when I ask their expectations on timeframe.  

In probing this belief, unsurprisingly the closest parallel to selling a business for these franchisees is the process of selling a house. The values could be broadly similar, there are a similar number of parties involved, there is a formal valuation, marketing the asset, negotiation after a suitable candidate is identified, instructing of solicitors for the buyer and seller, and a broker or agent coordinating and ensuring the road is as smooth as possible.  

But the reality can be very different when selling your franchise instead of your property.

In the UK the average franchise resale takes approximately 18 months from the point of bringing to market through to completion. 

So where do you start the process of selling – contact a broker you’ve found on Google? If you do, do some due diligence of your own: how long do they take to respond to your enquiry? Do they sound professional and knowledgeable? Are they saying what they think you want to hear, or are you getting honest insights and having realistic expectations set? 

And those are just the basics for any business sale – a franchise resale comes with extra considerations too, which is why a franchise resale broker is worth its weight in gold for a selling franchisee. Here are two reasons why: 

  1. Know your audience(s)

First, you’re fishing in a very specific pond and a franchise broker knows the water well. Let’s use an example: you own a well-known domiciliary care franchise business in a major city and you’re looking to sell it for £850,000. 

Approaching a general business broker has benefits, but consider their knowledge of the franchise landscape. Do they have the necessary knowledge of the nuances and intricacies associated with effective franchise recruitment? Do they understand the importance of remaining at arm’s length? Of considering the requirements of the franchisor, who of course must give the prospective buyer the green light?  

Then consider, in the whole of the UK, how many people are actively looking for a business opportunity? Of these people, how many are considering a franchise or could be tempted by one they come across? How many of these people are in the right location or are willing and have the means to relocate? Do they have the required amount of liquid capital? Are they suitable for borrowing if there is a shortfall? 

This is why it’s so important when marketing your business that you set the right asking price, you know who you’re targeting (and how), you produce top quality marketing collateral, detailed and appealing information packs, and of course you’re available to speak at convenient times – typically well outside office hours.  

If you’re serious about selling your business, a franchise resale broker can be a game-changer in putting you in the best position to generate enquiries and ultimately, get them excited about your opportunity. 

  1. Objective thinking

Second, finding a buyer for your franchise is one thing, but guiding them through an emotional and sometimes complex resale process is another. It’s going to take time and no little effort. 

As a business owner, there is understandably an element of ‘emotional attachment’ from all the blood, sweat and tears you’ve put into the business. This is where being detached and looking at the sale from a commercial and largely unemotional position can be a significant advantage – after all, that’s the position your buyer is coming from too. 

A strong prospective buyer or a good potential franchisee will want to do some serious due diligence on your business; the standard asks may be three years of trading history, a prospectus of sale/overview of the business, and some up-to-date management accounts. 

But they’re also going to want to speak to and meet the franchisor, other franchisees, visit your current business and they may want to build out a business or financial plan prior to gaining bank funding.  

All of these things take time and often, the more you try to skip through these things, the longer they’ll take later on in the resales process. Not only that, but as the seller if you’re trying to hurry things along, you may damage trust or put a potential purchaser off your business completely. 

So, while at the outset you might be dreaming of a business sale in 3-6 months, consider if this allows adequate time for the process to take place properly, without hurrying things along to the point where it becomes detrimental to the deal. 

Because at best, that can potentially impact the value you’ll get; at worst, it can lead to a buyer walking away entirely.

Share this post

Share on email
Share on twitter
Share on facebook
Share on linkedin